Search form

Executive Highlights

This morning, Livongo Health announced completion of an oversubscribed $44.5 million round of Series C financing. Notably, new investors included Merck’s Global Health Innovation Fund and Zaffre Investments (the investment arm of BCBS of Massachusetts). Existing investors Kleiner Perkins Caufield & Byers (KPCB), DFJ, and General Catalyst returned just one year after the $20 million Series B round.

The funding will help launch the next version of Livongo’s cellular-enabled blood glucose meter later this year (featuring over-the-air software updates), build out a platform for comorbidities (weight, high blood pressure, depression), and support data analysis work.

Livongo is now approaching 10,000 members and expects to double in membership size in the next few months. Over 50 organizations are currently using Livongo for Diabetes, made up primarily of large self-insured employers like Lowe’s, Quicken, Macy’s and others and also including payers like Humana and Cigna, PBMs including Express Scripts, and health systems like Mount Sinai in New York and Mission Health in North Carolina.

This morning, Livongo Health announced completion of an oversubscribed $44.5 million round of Series C financing with a very significant step up in valuation. Notably, new investors included Merck’s Global Health Innovation Fund (a longtime WellDoc investor) and Zaffre Investments (the investment arm of Blue Cross Blue Shield of Massachusetts). It was particularly positive to see existing investors Kleiner Perkins Caufield & Byers (KPCB), DFJ, and General Catalyst return just one year after the $20 million Series B round, signaling continued confidence from three very highly regarded venture capitalists.

This round of funding will help launch the next version of Livongo’s cellular-enabled blood glucose meter later this year (featuring over-the-air software updates), build out a platform for comorbidities (weight management, high blood pressure, depression), and support efforts to give members more actionable and personalized insights (“n=1” data mining).

Livongo is now approaching 10,000 members and expects to double in membership size in the next few months based on existing and new client commitments. Over 50 organizations are currently using Livongo for Diabetes (up from “over 20” one year ago), including some very big names: Cigna, Express Scripts, Mount Sinai, Lowe’s, and SC Johnson. Livongo’s team is just under 100 employees and includes just 10 CDE coaches on staff; the company also partners externally to make sure its 24/7 coaching service can meet members’ needs (more below).

In late 2015, Livongo launched a pilot of a consumer-facing business model (unlimited strips for a competitive monthly fee). The early access program now has a few hundred members, and the company is still learning how to improve the program before it is ready to launch more broadly (no timing disclosed at this time). The pilot timing was on track with expectations last year, though getting the business model right is definitely not easy. A Spanish language version of Livongo’s system is currently available, consistent with plans a year ago.

Our interview with CEO Glen Tullman shared a few metrics of note:

At four months, Livongo users are 17% less likely to have a low BG(<80 mg/dl) and 18% less likely to have a high BG (>180 mg/dl) – this is based on 10,000 patients. Both are sustained out to the 12-month mark. Metrics like this are made possible by data flowing in continuously from the company’s cellular-enabled meter.

One very large self-funded employer saved $186 per Livongo member per month on total medical costs and $118 per Livongo member per month on diabetes-specific costs (the $118 is part of the $186). The cost of Livongo’s system was ~$70 per month (gross) at the time it launched in 2014; assuming it is still in that ballpark, monthly savings is a 3x return for diabetes spending and closer to 5x for overall healthcare spend for Livongo users. Wow!

Livongo’s members check their blood glucose “more than 2x the national average,” “91% of members have a positive experience with Livongo,” and “78% of members feel more confident about their diabetes management.” All these stats are terrific, even though the national average per Roper is something like just once a day, we believe.

Livongo’s net promoter score is a very strong +56, well above the typical healthcare score and approaching consumer companies like Apple. We would be very curious to see their most enthusiastic patients vs. those who do not recommend Livongo to know what they are learning.

See below for our views of Livongo’s Strengths and Weaknesses, more on the company’s progress, pipeline plans, and our interview with Mr. Tullman (his biggest learning, surprise, and upcoming challenges; competition; and what a homerun in 2016 would look like).

- Better CGM from Dexcom and Medtronic, lower-cost, factory calibrated Abbott FreeStyle Libre, automated insulin delivery (reducing need for strips) – since Livongo’s market is more type 2 than type 1, much of this may not matter

Funding and Business Details

Livongo customer Lowe’s deployed the systemto employees and their family members with diabetes in three states last September. “Based on strong early results” Lowe’s has now expanded access to employees and dependents nationwide. This is a major win for Livongo – Lowe’s has 265,000 full- and part-time employees in North America and is the eight largest US retailer (2015 revenue: $59 billion). A presentation at Levine Riggs last month also mentioned an ongoing, 120-patient, 12-month trial of Livongo’s cellular-enabled blood glucose meter in type 2 diabetes (baseline A1c ~10%); we assume results could come later this year or early 2017.

Merck Global Health Innovation Fund (new investor): The $500 million fund previously invested in WellDoc’s Series A (January 2014) and Series B rounds (December 2015). Merck GHI invests in digital health “with a vision that data will be the currency in healthcare” – its portfolio page lists 28 investments, and WellDoc and Livongo are Merck GHI’s only direct investments in diabetes.

General Catalyst (returning investor): Several investments in successful companies – Airbnb, Snapchat, Warby Parker are just a few. The LoseIt! weight loss app is also a portfolio company.

DFJ (returning investor): Just some of DFJ’s notable investments include Tesla, Box, and Skype. The VC has had 23 portfolio companies reach $1 billion in sales.

7wire Ventures (returning investor): 7Wire’s Managing partner is Lee Shapiro, former President of Allscripts and Livongo CEO Glen Tullman are key partners. It does not have other investments in diabetes but is said to be demonstrates very clear commitment.

Sapphire Ventures (new investor): Fitbit, LinkedIn, and Box are a few notables from its portfolio. This is SAP’s investment fund.

Pipeline and Product Details

One of the main features of Livongo’s next generation cellular-enabled meter is over-the-air software updates. Like Apple, Google, or Tesla, over-the-air updates mean upgrades can be rolled out as they are developed instead of waiting on multi-year product cycles that most medical devices are beholden to. The company sees this as a “gamechanger” for its meter and a path to further personalizing each individual’s experience. Dexcom pioneered this approach in diabetes with its Software 505 G4 receiver algorithm upgrade, while Tandem is pursuing this route with its Tandem Device Updater (clearance expected in 2Q16). Bigfoot also expects to offer over-the-air updates. We expect this will become increasingly common as devices get cloud connected or work with paired apps.

Livongo’s cellular-enabled meter will continue to offer the primary user experience, unlike other BGMs that have down-featured the hardware and up-featured the paired apps(e.g., LifeScan Verio, Accu-Chek Connect). Management shared with us, “Bluetooth, while a step up from cables, is not hassle free and gets in the way of true real-time connectivity. We believe we can continue to build best-in-class features into the meter. We have a great team focused on both iOS and Android but we won’t take away anything from the meter. This is about meeting our members where they are. Remember, we have both Type 1 and Type 2 and cover all ages.”

“We believe our members should have a full experience with the device, and apps and web-based components will complement and enhance it. Livongo’s companion mobile app provides access to readings and relevant insights, along with direct access to coaches.

This is a tough conundrum for diabetes technology companies– where should the primary user experience reside? Some would argue the full experience should be built straight in the medical device (e.g., Livongo), as it’s what patients have to use and will always have with them. Plus, building less functionality into the medical device makes users more reliant on the paired smartphone app, which has drawbacks (e.g., Bluetooth hassles, battery dying, inaccessible to those without a smartphone). On the other hand, down-featuring hardware and up-featuring paired apps enables lower cost medical devices and a better user experience on the phone – this is the strategy LifeScan’s Verio, Roche’s Accu-Chek Connect, Bigfoot’s automated insulin delivery system, and Insulet’s next-gen PDM are going in. It’s a tough call and we’re glad to see companies pursuing both routes.

Livongo’s coaching includes personal insights, real-time targeted outreach when blood glucose readings are high or low, and the ability for a member to reach out any time by phone, text, email, or directly from the meter. The company has just ten CDE coaches right now but many partners, like healthsystems, use their own CDE’s for coaching and rely upon Livongo for real-time alerts. Each CDE can, with the help of technology, manage 1500-1800 people with diabetes. the key, management told us, is targeted outreach when patients need help.

Scalability is always a big question for coaching services– will Livongo’s current model continue to work with 100,000 members (10x the current size)? Obviously a lot of triage can be done with dashboards, and presumably, artificial intelligence can help too. Still, human experts are expensive and the ability to serve an increasing customer base is something Livongo has to prove. Other diabetes and prediabetes products with coaching include Omada, Yes Health, Fit4D, and OneDrop (planned).

As a reminder, Livongo launched in September 2014 with an enterprise business model that includes: (i) a cellular-enabled glucose meter that automatically sends blood glucose readings to the cloud and gives patients instant feedback on readings; (ii) 24/7 coaching from a team of certified diabetes educators (via phone, text, and a Livongo mobile app); and (iii) an online portal for viewing data. See a picture below of the current offering.

Interview with Livongo CEO Glen Tullman

ADAM: What has been your biggest learning as you have scaled the business?

GLEN: We built our program on the notion that real-time, context-sensitive support is a gamechanger. We’re the first in the market to offer the latest technology and personalized coaching in one program and we’ve been excited to hear our members validate the importance of coaching. But that simply validated what we hoped for.

We’re learning how to get people to choose the Livongo solution in greater numbers . . . remember, it’s all “opt-in” and when you don’t force people (we don’t believe in that), you better have something they really love.So, adoption and retention in greater numbers and that means building an experience people with diabetes love (not like).

ADAM: That’s really interesting. What has surprised you the most?

GLEN:We have been surprised at how much the market is ready for a different kind of solution for diabetes management.

Our healthcare system is built around acute care. For chronic conditions, there’s so much more that we can be doing. In today’s model, a typical person with diabetes might see a doctor or an endocrinologist once every few months, meaning only a few hours a year. That’s less than .1% of their waking hours. But the other 99.9% of their time managing their diabetes happens outside of the doctor’s office, generally on their own. I think our own Manny Hernandez created this movement of not being alone and with Livongo, you are always connected and never alone to deal with your diabetes. That’s why we think the market has responded so well to the idea of real-time monitoring coupled with support and coaching.

GLEN: We love that people are innovating in diabetes care and, until we find a cure, which I hope is soon, we want to make it easier and easier to live with diabetes. Competition makes us all better. The Livongo program is an integrated solution that combines the latest technology with coaching, but most important, we’re really focused on our members and we really care. And it shows. One place is our team of Certified Diabetes Educators who deliver context-aware support to our members when they need it the most – when they’re out of target range – and they will also do scheduled coaching sessions, all part of our goal to keep people healthy.

In addition, for Livongo, data is captured in real-time via our cellular-enabled device. We are not dependent on our members having a smartphone or figuring out Bluetooth pairing. While it is true that smartphone adoption continues to rise, important numbers of people with diabetes (even more so, in segments that are more disproportionately affected by the condition) don't have an iPhone or an Android phone.

We believe it's important for the member experience to be cohesive and accessible, so as to not add more hassles to the already hassle-packed experience that is diabetes. Our team is focused on how to build an intuitive customer experience. That’s why our program does not require a prescription, which WellDoc’s does, and why we offer features like unlimited strips. It’s all about building an amazing member experience for people with diabetes.

KELLY: A cure isn’t going to come that soon so it’s great that you are so hard at work!

ADAM: I agree, Kelly! Glen, if you could change one thing about the product or business model tomorrow, what would it be?

GLEN:If we could change one thing, it would be having our product accessible to all people with diabetes, for free. We should understand that keeping people healthy is the most important goal we can have from a healthcare perspective, but also from a cost perspective. Having said that, we understand the realities of today’s payer model, so we’re moving as quickly as we can in the current system to get to as many people as we can. We want lower costs and better care. Technology and smart data science can help us do that and no, we’re not running for office.

KELLY: Thank you so much for those sentiments – and boy do we wish you WOULD run for office! Your goals are so ambitious - thank you!

ADAM: Yes – thanks! So if you got another $100 million in funding tomorrow, what would you do?

GLEN:We raised the round we wanted. In fact, we were oversubscribed. So if we did have $100 million more, we would put it in the bank to give us more options in the future. But we believe we have great access to capital when we need it.

ADAM: Congratulations from Close Concerns on that! What would a home run for Livongo look like in 2016?

GLEN:At Livongo, we put members first. A home run in 2016 would translate into increased member satisfaction and having them experience Livongo moments – those moments when we are there for them when it matters most. A grand slam would mean we continue to have great momentum with self-funded employers, plans, and providers, to get our solution out to empower many more people with diabetes to live better lives.

KELLY: That’s so great – we really need that, given that over 10 million people in the US alone aren’t at their glycemic targets.

ADAM: What is the biggest challenge Livongo faces in the next three years?

GLEN: Our most important challenges are how we scale to bring our solution to the masses . . . 30 million people in the US and more than 400 million around the world. And, how we do that cost-effectively in ways that fit within our healthcare reimbursement systems. In addition, because we’re really hoping for a cure, we also want to expand to other chronic diseases and become the comprehensive platform that people with chronic diseases use to manage their bodies, their medications, and everything they have to do for their disease to keep it in check and stay healthy. We want to help people understand and manage their body’s vital narrative, that unique story each of our bodies has. It’s a lot to say and a lot to do, but we’re on our way. That said, I would like to really bend the curve on diabetes first.

KELLY: Thank you SO much for all you are doing to help people with diabetes lead better lives Glen! Congrats on the scaling of your system and say hello to Manny for us …!